Inside the hidden world of Roman's empire

In his first interview for three years, Roman Abramovich, the billionaire owner of Chelsea FC, explains his relationship with the Kremlin, dismisses rumours of divorce, and reveals why he is quitting as governor of Chukotka

'He's very quiet,' says one of Roman Abramovich's closest aides. 'Shy would be a word to describe him.' There have been many others: ruthless, generous, audacious, calculating, visionary. But shy? A strange adjective to describe one of the world's richest and most powerful men - the Russian oligarch who dared to seize English football by the throat.

Then again, no one can quite be sure what to expect on meeting Abramovich for the first time. So little is known of his past, or of his views on business, politics or sport, that guesswork and speculation have fleshed out the man. Was there something untoward about the way he amassed his billions in the 'cowboy capitalism' of Nineties' Russia? How and why has he retained the patronage of President Vladimir Putin while other businessmen were exiled or jailed? What would football look like without him? What will football look like once he has gone?

Well, now we know a little more. In his first interview anywhere in the world for three years, Abramovich talked to The Observer about why he took on English football and insists that his big spending will not destroy the game. He seeks to demolish myths about his childhood and life among London's Russian elite. In the wake of the Litvinenko poisoning affair, he answers and sometimes evades questions about his ties with the Kremlin and why he has quit as governor of a region three times the size of the UK where, by any measure, he has performed an act of extraordinary philanthropy.

Forty years old, 'the quiet oligarch' is sitting in a varnished boardroom in the office of his finance company a short walk from Red Square. At the back of the room is a small picture of Putin and a sculpture of a long fish, given to Abramovich as a gift. On the oak table sit bottles of Evian water - a constant companion to the almost teetotaller on his travels. There is no sign of a security guard.

Like his fellow billionaire Bill Gates, Abramovich is unexpectedly slight. His recent visit to a clinic in Austria was not, as reported, to cope with stress but to shed a couple of kilos in weight. He has receding brown hair, his customary designer stubble and azure-blue eyes. More comfortable in jumpers and jeans, today he is wearing a dark grey suit with thin pinstripes, his blue shirt open at the collar and tieless. Despite his estimated wealth of £10.8bn, the second highest personal fortune in Britain, he sports a chunky Eighties-style digital watch. It doesn't look expensive.

In the first part of the interview the main topic is Chukotka, the icy region in Russia's remote north-east corner where Abramovich has been governor for six years and poured in hundreds of millions of pounds of his own money building schools and equipping hospitals. He speaks Russian with the voice of a bashful public speaker who nevertheless knows his audience will hang on every word. He once reluctantly agreed to be heard on BBC television, but today he has banned even the use of a dictaphone.

On his right is Sasha Borodin, his assistant and interpreter, and John Mann, an American who is Abramovich's spokesman and rumour sweeper: he describes reports that Irina Abramovich recently consulted divorce lawyers as 'definitely not true'. Abramovich sits with arms folded, looking like a man ill at ease. Shy, actually, would be the word.

When the conversation moves on to football, however, he is palpably more relaxed. He does not even take offence when it is put to him that by licensing a bottomless pit of cash, and a scattergun approach to the transfer market, he threatens to turn football into a rich man's game dominated by a global elite.

'I don't see the risk of that,' he said. 'Money plays an important role in football but it is not the dominating factor. When Chelsea play a Carling Cup game in a small city and it could result in a draw - the excitement, the spirit, the atmosphere - that's the real beauty of football in England.'

Abramovich, who made his fortune from oil when Russia's public utilities were privatised in the Nineties, was unknown in Britain until he turned football upside down by buying Chelsea three years ago. He has poured an estimated half a billion pounds into writing off the club's debts and buying players at extravagant prices.

His largesse has caused resentment that goes beyond the normal envy from fans. Chelsea, with its stated ambition of becoming the biggest club in the world, has also become one of the most hated. It has flouted transfer regulations and left a sour taste in many mouths across Europe at the way Abramovich does business. Too aggressive? For once there was a long pause. 'It's difficult to say,' he said at last, in what sounded like a concession. But he then went on to speak off the record and make clear that he feels Chelsea should not be singled out.

No one knows how long the Abramovich empire will last. An employee who has known him for several years warned: 'He gets enthusiastic about things but it doesn't last long. He was enthusiastic about oil for a few years but then got out. It will be the same with Chukotka. It will be the same with football.'

Abramovich, however, is aware of the charge and had an answer ready: 'People who know me said I will win one or two Premierships and will not be interested after that. The reality is that we've won two Premierships but I'm more excited about this particular season than last year or the year before. I am a fan of special nature. I'm getting excited before every single game. The trophy at the end is less important than the process itself.'

Abramovich is part of the rich Russian set that has colonised London's most exclusive neighbourhoods. He has a house in Belgravia worth an estimated £28m as well as an £18m estate in West Sussex. His wife, Irina, a former air stewardess, enjoys the city life and the couple's five children go to English schools. But Abramovich - who also owns a £10m St Tropez villa, two superyachts and a Boeing 767 - does not necessarily regard the British capital as home. 'I live on a plane. I like to visit London. If I had to think where I could live if not Moscow, London would be my first choice and second would be New York. In Moscow I feel most comfortable. I'm used to four different seasons; it's difficult for people in London to understand. People brought up in Russia like my kids want to play in the snow.'

Cold War enmities die hard and the mysterious murder in London of Alexander Litvinenko, the former KGB spy killed by polonium 210, revived the spectre of Russian authoritarianism and foul play. Abramovich claimed to have no opinion on the matter and expressed his faith in 'detectives' to solve it.

He also insisted that he has never been threatened in London and that accounts of his armed bodyguards are exaggerated. He laughed off suggestions that his security precautions include a lookalike to confuse would-be assassins. He claimed that not even the British press, which photographed him and his wife out shopping as rumours about the marriage swirled, have ruffled him. 'I can understand the British media and why they are doing that. It does not add up to much. I'm used in my life to not paying much attention to some things.'

Litvinenko's sinister death was a blow to the image of the gilded circle of Russian expats, but the most famous of them all professes ignorance about how Britain perceives him. A certain steeliness behind the eyes suggests he does not care much.

At the end of the earth and a little bit further is a place called Chukotka. Nine times zones and 4,375 miles east of Moscow, even Russians need a special permit to visit. It took the Soviet revolution two years to reach the frozen waste, when a tiny band of Bolsheviks brought the news that private enterprises were now state property - only for local capitalists to shoot them dead. But communism eventually took hold and the region, 24 miles across the Bering Strait from Alaska, became the front line in the Cold War.

Chukotka straddles the Arctic Circle and its nine-month winter can witness temperatures as low as -60C. It is one of the most hostile environments on the planet, home to just 50,000 people and thousands of miles of nothingness. In the troubled Nineties, wages went unpaid and people starved or walked miles across the frozen tundra to eat a scrap of seaweed or whale blubber. Chukotka was described as a 'post-Soviet pit of despair'; its residents, so the joke has it, consider Siberia a good place for a holiday.

It is hard to imagine a world further removed from that of pampered millionaire footballers, yet this was the first pet project of Abramovich and his fabulous wealth. He arrived as a former student and rubber-duck salesman who had made a killing as the protege of Boris Berezovsky, one of the businessmen who snapped up Russia's state assets at bargain prices as the country plunged into capitalism. When Berezovsky fell foul of Putin, Abramovich bought his mentor's stakes in Sibneft, the oil giant, and Aeroflot, the national airline, and emerged as an oligarch in his own right. Business opponents accused him of ruthless dealing and he was once investigated by the authorities but cleared; allegations of wrongdoing have never stuck.

He had not set foot in Chukotka until the autumn of 1999 but soon became its representative in the Russian parliament and then ran for governor, flying to dozens of remote villages and listening patiently for hours on end to numerous gripes. There were no charismatic set piece speeches - not his style - but he won the election with nearly 100 per cent of the vote, the sort of figure which usually alarms democrats, and took office in 2001. Abramovich spared his family a move but registered as a Chukotka taxpayer, brought Sibneft with him and created two charities whose projects included giving all the region's children an annual holiday somewhere warm. In all he has channelled an estimated £770m into Chukotka and attracted a further £500m inward investment. Critics believe that he was anxious to show Putin and other patriotic Russians his willingness to put the wealth he made on the back of natural resources back into the country, so avoiding the fate of Yukos oil baron Mikhail Khodorkovsky, a politically ambitious critic of the president now serving a prison sentence for tax evasion. But Abramovich's charitable work in Chukotka started before Putin became hammer of the oligarchs.

Abramovich appears weary of the speculation around why he chose the bleak outpost. 'Everyone's got their own reason. Some believe it's because I spent some of my childhood in the far north that I helped Chukotka, some believe it's because I had a difficult childhood that I helped Chukotka, some believe it's because I stole money that I helped Chukotka. None of these is real. When you come out and you see a situation and there are 50,000 people, you want to do something. I haven't seen anything worse than what I saw there in my life.'

Is it the obligation of every billionaire to give a portion of their wealth away? 'If you want to please everyone, the answer would be yes. But charity is a very complicated thing. It's important to find an area where you can really help and you can feel the results. Charity is not like feeding pigeons in the square. It is a process that requires professional management.'

It would take a special kind of cynic not to be impressed by the results. According to Abramovich's press office, 18 new schools have been built, a further 18 rebuilt and new computers, televisions, text books, free meals and therapy facilities provided to pupils. The once-threatened indigenous cultures and languages of the Chukchi and Inuit minorities are back on the curriculum. Twenty-eight hospitals and medical centres have been constructed. In Anadyr, the regional capital, there is a cinema, hotel, museum, supermarket and cultural centre. There is a German-themed restaurant, inspired by Abramovich's visit to the Oktoberfest in Munich five years ago. He always sits at the same table in a quiet corner and likes to play billiards upstairs.

The office claims life expectancy in Chukotka has risen by three years and the birthrate has increased by almost 50 per cent to become the highest in Russia. Infant mortality has been more than halved, giving Chukotka one of the 10 best records of any region in the country - previously it was among the 10 worst.

Children have been at the heart of this grand social project. Much of Abramovich's own childhood was spent with an uncle in an inhospitable northern region, Komi, after he was orphaned at the age of two and a half. These formative years have been described by others as miserable but Abramovich was keen to correct the impression: 'To tell the truth I cannot call my childhood bad. In your childhood you can't compare things: one eats carrots, one eats candy, both taste good. As a child you cannot tell the difference.'

Last week Abramovich's lieutenants took journalists on a tour of Chukotka schools and hospitals. Staff spoke of a miraculous transformation and hailed Abramovich as a messiah. Alexander Maslov, head doctor at the Chukotka regional hospital, recalled: 'In February 2002, the governor invited me to look around the hospital and I wanted to shoot myself because it was so terrible. It was very old, the roofs were leaking, paint was peeling off the walls.' Now the hospital has been completely modernised and Maslov is the luckiest doctor in the world: 'We've got everything we want,' he said.

Reindeer husbandry, a way of life for the Chukchi, has also been saved. Left to the free market, the reindeer herd dwindled from half a million to just 96,000 as animals were eaten out of desperation, and herders lost their jobs and turned to drink. Abramovich-funded subsidies have restored the herd to 200,000 and given the Chukchi wages and hunting weapons. Reindeer herders Aleksei Omrynkau, 57, and his wife Katy, 56, a Chukchi couple, have spent their lives in the sub-Arctic tundra and live in a teepee, or yaranga, made from reindeer skins. Aleksei said: 'In the Nineties there was no money at all and people paid with produce. It's like Soviet times again now: the wages, food supply and social structure are better.' The Omrynkaus have one of the most remote homes conceivable, surrounded by a blanket of white, about 20 miles from the next human habitation. Yet even they have heard of Chelsea's football team. 'I read about it in a magazine in the village,' said Aleksei. 'I'm proud of the governor.'

Abramovich's departure has been cited as evidence that he has lost interest in his native country altogether; last year he sold Sibneft to Gazprom, the state-run gas giant, making himself even richer. But he has billions of pounds invested in Russian steel, pharmaceuticals, property, food processing and magazine publishing, and donates to youth academies for music, science and sport and to several Jewish charities.

When it comes to currying favour with the Kremlin, he has scarcely put a foot wrong. He denies striking any deals and points out that the governorship did not guarantee him political immunity. Yet he will not join criticism of Putin despite growing fears about the direction of a country where journalists have been murdered, suspects tortured in police custody and business corruption is rife. 'In my personal opinion Russia is no less democratic than it used to be,' was his artful comment. Was it ever democratic? 'It is a democratic country. It is democratic enough.'

Khodorkovsky is serving an eight-year sentence in a Siberian penal colony. Berezovsky is in exile in London. Abramovich might appear to be the Kremlin's favourite oligarch. 'Do you mean compared to those who found themselves in exile?' he asked. 'I've never tried to impose pressure on the authority of the government through my business achievements. I cannot tell you what the others were doing.'

The English pronoun 'you' translates into Russian in two ways: vy as a polite form, and ty for addressing friends. When Abramovich meets Putin, he uses vy. 'He is more senior than me,' he explained. The interview done, Abramovich poses for photographs and parts with a smile and wave, his gentle demeanour and lean figure at odds with the fabled marauding Russian bear. He is not one to roar about anything; this instinctively quiet man recognises when silence can serve him better than words. As the multi-billion pound fortune grows, the world waits for him to find a new 'toy'. But winning in life, as in football, can be a fragile business. 'There is a Russian proverb,' he muses, 'You never say that you'll never be in jail or never be poor.' Yet another reason to keep your head down.

The Abramovich CV

Born: Saratov, a town on the Volga river in southern Russia, on 24 October 1966. His mother died from blood poisoning and his father, a building worker, was killed in a construction site accident, leaving him an orphan before his third birthday.

Education: Studied at the Industrial Institute in Ukhta, Komi; drafted to military service; gained a law degree from Moscow State Law Academy in less than a year.

Business interests: Made his fortune from oil, aluminium and airline Aeroflot. Now owns assets in steel, pharmaceuticals, property, food processing and magazine publishing - and Chelsea Football Club, which he bought for £140m in 2003.

Political interests: About to step down after six years as governor of Chukotka, in far north-east Russia.

Estimated wealth: £10.8bn, making him the second richest man in Britain behind steel magnate Lakshmi Mittal.

Family: Married Olga, a divorcee three years his senior, in 1987 but separated two years later. Now married to Irina, a former air stewardess, with whom he has five children.